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Tuesday, November 15, 2016

Wednesday Watch

Another Financial Warning Sign Is Flashing in China.Add
another credit indicator to the financial warning signs flashing in
China. The adjusted loan-to-deposit ratio, which includes a range of
off-balance sheet items and is an indicator of the banking system’s
ability to weather stress, climbed to 80 percent as of June 30,
according to S&P Global Ratings. For some smaller lenders, the ratio
has already topped 100 percent, S&P estimates. S&P’s adjusted
measure is rising much faster than the official loan-to-deposit ratio as
banks pile into off-balance sheet lending, sidestepping government
efforts to rein in credit. At the current pace, overall credit could
surpass deposits on an adjusted basis within a few years -- a level that
would give China little leeway to stave off financial turmoil, S&P
says.

Trump Sends EM Defaults to the Edge. Talk
about great timing. Trump's election has sent the U.S. dollar and
Treasury yields soaring, increasing the cost of funding for
emerging-market countries and companies in one week. And it's happening
just as the biggest pile of dollar bonds in the history of developing
nations is coming due.

Asian Stocks Advance With South Korea’s Won as Trump Shock Fades.
Asian stocks rose for the first time in four days and South Korea’s won
strengthened as volatility in global markets shows signs of dying down a
week after Donald Trump’s shock U.S. election victory. Energy shares
led gains on the MSCI Asia Pacific Index after crude oil posted the
biggest jump in seven months amid optimism OPEC members will finalize a
deal to cut output. The won rose versus all of its major peers, while
Bloomberg’s dollar index held near a nine-month high and New Zealand’s
dollar weakened. Japan’s 10-year bond yield stayed at zero, having ended
almost eight weeks of negative rates in the last session, and
Australia’s stayed near its highest level since April. The MSCI Asia Pacific Index added 0.6 percent as of 9:17 a.m. Tokyo time, with a gauge of energy stocks climbing 1 percent.

Awash in Gasoline, U.S. Refiners Export Fuel at Record Pace. The
U.S. has more gasoline than it knows what to do with. Exports have
risen above imports for three consecutive weeks as recurring pipeline
outages and higher production levels by refiners caused Gulf Coast
inventories to grow. Typically a net importer of gasoline, the U.S. has
shipped a record amount of the motor fuel abroad and doesn’t show signs
of stopping.

Fed Rate-Hike Odds Approach 100% in Anticipation of Trumpenomics.
Analysts spent early November warning a Trump victory in the U.S.
presidential election would make the Federal Reserve less likely to
raise interest rates. What happened instead is that it made a December
increase almost a certainty. Traders assign about a 94 percent
probability, the highest level this year, to a Fed move at its final
meeting for the year on Dec. 13-14, futures contracts indicate. Trump’s
spending plans are driving expectations the Fed may pick up its pace of
rate increases as inflation expectations climb.

Trump’s Team Discussing Tax Overhaul With House, Brady Says.House
Republicans are talking with President-elect Donald Trump’s transition
team about how to fashion the biggest U.S. tax overhaul in three
decades, the chairman of the House Ways and Means Committee says. “We’re
talking to the Trump team about timing” for producing written
legislation that would slash tax rates on businesses and individuals and
remake the U.S. tax code next year, said Kevin Brady, the Texas
Republican who chairs the House’s tax-writing panel. “We’re writing
provisions of the bill as we speak.” Trump and House Republicans,
led by Speaker Paul Ryan, want dramatic rate cuts. They also want to
scrap features of U.S. tax law that they say put American companies at a
disadvantage globally -- and have spurred companies to leave as much as
$2.6 trillion in profit overseas, where it remains untaxed.

Obamacare Startup Oscar Has $45 Million Loss in Three States.Oscar
Insurance Corp., the Silicon Valley-backed health-care startup,
continued to lose tens of millions of dollars in the third quarter as
the company undertakes a strategy shift. The New York-based company
sells health insurance to individuals in new markets set up by the
Affordable Care Act. Its attempt to reinvent the insurance business has
been marked by large losses -- in the third quarter, closely held Oscar
lost $45 million in New York, Texas and California, according to filings
with regulators. That follows losses of $83 million in those states
during the first six months of this year.

Trouble Brewing in Commercial Real Estate. Delinquency rates climb on debt, pointing to downturn in $11 trillion market. Defaults
are rising in a key corner of the commercial real-estate debt market
just as borrowing costs are set to jump, raising the likelihood of a
slowdown of the $11 trillion U.S. commercial property sector in 2017.

BOTTOM LINE:Asian indices aremostly higher,boostedbyindustrial and technology shares in the region. I expect US stocks to open mixedand to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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